Transcripts

The President & Congress Come Together To Fight Foreclosures

PAUL KANGAS: The White House and Congress are moving closer to working together to address the housing crisis. The Bush administration expanded what's called the FHA secure program today to help more borrowers refinance troubled mortgages. As Stephanie Dhue reports, it came as the House Financial Services Committee considered more sweeping legislation to expand the FHA role.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Chairman Barney Frank calls today's expansion of the administration's FHA secure program a remarkable coincidence, coming on the day of a hearing on his plan to grow the housing agency.

REP. BARNEY FRANK, CHAIRMAN, HOUSE FINANCIAL SERVICES COMMITTEE: We have a substantial amount of agreement now and those who think that we should do nothing that could theoretically or even actually expose taxpayers to more risk, they will have to deal with me and the Bush administration together. And we will work this out.

DHUE: For homeowners upside down on their mortgages, both the administration and Frank's plan would require lenders to voluntarily write down a portion of the loan amount. The administration's plan is more modest. It uses an increase in FHA insurance premiums to pay for half a million refinancings. Frank's plan would have the FHA guarantee some two million refinancings with $20 billion of taxpayer money. But Frank's plan came under fire from many Republicans. Congressman Spencer Bachus says it will keep home prices from declining to a more affordable level.

REP. SPENCER BACHUS, (R) ALABAMA: This process of market correction, while undeniably painful is a necessary and unavoidable reality, government intervention to impede the return to the long term trend line no matter how well intentioned is likely to do more harm than good.

DHUE: But Frank's plan did get some support from regulators. Office of Thrift Supervision Director John Reich says the situation is serious enough to warrant creative solutions.

JOHN REICH, DIRECTOR, OFFICE OF THRIFT SUPERVISION: While we do not think that using FHA as a financing vehicle to prevent foreclosures will be the silver bullet to stop the housing slide, we do think that it's an important additional tool that lenders can use to stem the rise in foreclosures.

DHUE: It's unclear if even both plans would be enough to prevent a mass wave of foreclosures. Both require lenders to voluntarily take losses on troubled loans, something so far they've been reluctant to do. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.